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Here's How KMI's Contract-Based Model Supports Stable Cash Flows
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Key Takeaways
KMI's highly contracted model supports stable, predictable cash flows across commodity cycles.
KMI says 96% of cash flows are take-or-pay, fee-based or hedged, limiting volatility exposure.
KMI's $10.1B project backlog is 92% tied to natural gas opportunities as demand expands.
Kinder MorganInc. (KMI - Free Report) is a leading midstream energy company that owns and operates one of the largest energy infrastructure networks in North America. Its network comprises approximately 78,000 miles of pipelines, 136 terminals and more than 700 billion cubic feet of natural gas storage capacity. The company’s business is highly contracted, which ensures stable and predictable cash flows.
In fact, KMI has highlighted that 96% of its cash flows are either take-or-pay, fee-based or hedged. Notably, 65% of cash flows are tied to take-or-pay contracts, implying that customers pay a capacity reservation fee and the company is entitled to payment, irrespective of the actual throughput. Additionally, 26% of the cash flow mix comes from fee-based contracts, and only 4% of its total cash flows are unhedged and are exposed to commodity price volatility. Kinder Morgan’s business model helps keep it resilient during periods of commodity price volatility and demand fluctuations.
The company has highlighted that incremental demand for natural gas from power generation and liquefied natural gas (LNG) exports is expected to create expansion opportunities across its natural gas transportation network. At the end of the first quarter, KMI’s committed growth project backlog stood at $10.1 billion, of which approximately 92% is allocated to natural gas opportunities. Long-term growth in U.S. natural gas demand is expected to sustain the demand for KMI’s midstream services, enabling it to generate durable cash flows in the future. The resilient cash flows are expected to help the midstream company fund growth projects and maintain competitive shareholder returns across business cycles.
ENB & WMB Have Stable Business Models
Enbridge Inc. (ENB - Free Report) is a leading North American midstream energy company with an extensive crude oil, liquids and gas transportation pipeline network. It operates an extensive crude oil and liquids transportation network spanning 18,085 miles. ENB’s gas transportation pipeline network spans 19,372 miles across North America, expanding to roughly 70,272 miles when related gas gathering and NGL transmission assets are included, such as those associated with DCP Midstream. The midstream company’s business is highly stable, owing to its contractual nature.
The Williams Companies, Inc. (WMB - Free Report) is another leading player in the midstream energy sector, which operates a widespread pipeline system of more than 33,000 miles, including the Transco and Northwest Pipeline systems. These pipeline systems are among the largest natural gas transportation networks in the United States and are expected to benefit from the rising natural gas demand.
Both companies generate fee-based earnings, resulting in stable cash flows.
KMI’s Price Performance, Valuation & Estimates
Shares of Kinder Morgan have jumped 14.6% over the past year compared with the 19.4% improvement of the composite stocks belonging to the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, KMI trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 14X. This is below the broader industry average of 15.07X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for KMI’s 2026 earnings hasn’t seen any revisions over the past seven days.
View the Zacks #1 Rank List
Image: Bigstock
Here's How KMI's Contract-Based Model Supports Stable Cash Flows
Key Takeaways
Kinder Morgan Inc. (KMI - Free Report) is a leading midstream energy company that owns and operates one of the largest energy infrastructure networks in North America. Its network comprises approximately 78,000 miles of pipelines, 136 terminals and more than 700 billion cubic feet of natural gas storage capacity. The company’s business is highly contracted, which ensures stable and predictable cash flows.
In fact, KMI has highlighted that 96% of its cash flows are either take-or-pay, fee-based or hedged. Notably, 65% of cash flows are tied to take-or-pay contracts, implying that customers pay a capacity reservation fee and the company is entitled to payment, irrespective of the actual throughput. Additionally, 26% of the cash flow mix comes from fee-based contracts, and only 4% of its total cash flows are unhedged and are exposed to commodity price volatility. Kinder Morgan’s business model helps keep it resilient during periods of commodity price volatility and demand fluctuations.
The company has highlighted that incremental demand for natural gas from power generation and liquefied natural gas (LNG) exports is expected to create expansion opportunities across its natural gas transportation network. At the end of the first quarter, KMI’s committed growth project backlog stood at $10.1 billion, of which approximately 92% is allocated to natural gas opportunities. Long-term growth in U.S. natural gas demand is expected to sustain the demand for KMI’s midstream services, enabling it to generate durable cash flows in the future. The resilient cash flows are expected to help the midstream company fund growth projects and maintain competitive shareholder returns across business cycles.
ENB & WMB Have Stable Business Models
Enbridge Inc. (ENB - Free Report) is a leading North American midstream energy company with an extensive crude oil, liquids and gas transportation pipeline network. It operates an extensive crude oil and liquids transportation network spanning 18,085 miles. ENB’s gas transportation pipeline network spans 19,372 miles across North America, expanding to roughly 70,272 miles when related gas gathering and NGL transmission assets are included, such as those associated with DCP Midstream. The midstream company’s business is highly stable, owing to its contractual nature.
The Williams Companies, Inc. (WMB - Free Report) is another leading player in the midstream energy sector, which operates a widespread pipeline system of more than 33,000 miles, including the Transco and Northwest Pipeline systems. These pipeline systems are among the largest natural gas transportation networks in the United States and are expected to benefit from the rising natural gas demand.
Both companies generate fee-based earnings, resulting in stable cash flows.
KMI’s Price Performance, Valuation & Estimates
Shares of Kinder Morgan have jumped 14.6% over the past year compared with the 19.4% improvement of the composite stocks belonging to the industry.
From a valuation standpoint, KMI trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 14X. This is below the broader industry average of 15.07X.
The Zacks Consensus Estimate for KMI’s 2026 earnings hasn’t seen any revisions over the past seven days.
Image Source: Zacks Investment Research
KMI currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.